The Factoring Company Guide can help business overcome their fund flow issues |
Posted: April 27, 2017 |
Any business enterprise will testify that maintaining the cash flow is the toughest aspect of any business. Market compulsions force these enterprises to give credit to their customers for periods ranging up to 90 days as well. Under the circumstances, there is a locking of the fund flow position. The banks do come in between to finance the receivables. However, bank finance can involve furnishing of collateral security. There may also be issues of credit ratings. A business enterprise with adverse credit ratings cannot avail bank finance. This leaves the businesses with an unfavorable cash flow position. There is a viable solution to the problem. One can go through the factoring company guide and learn about apex factoring. Factoring is an alternative financing method. Instead of approaching the banker for finance, the seller can produce the bills to the factoring company for financing against the receivables. The factoring companies work in a different manner as compared to the banks. The banks insist on the credit rating of its customer, i.e. the person who approaches them for finance. The fleet one factoring company looks into the credit rating of your client to judge whether he is capable of paying the bill on time. Sometimes, it could be a reputed client with an impeccable credit record. Under such circumstances, the factoring companies can discount the bill for full value as well without any kind of margin. In the normal circumstances, they have a margin. The system works in a simple manner. The factoring company guide can explain it all. Once the transaction is complete for the seller, he has to dispatch the goods to the buyer. As per the terms of the contract, the buyer has a fixed credit period after which he has to pay the amount. He therefore, accepts the bills drawn on him by the seller. The seller takes these bills and approaches the factoring company. These bills include the transportation documents as well. The factoring company, after ascertaining the credit reputation of the buyer, discounts the bill and releases the payment to the seller. It dispatches these documents to the seller demanding payment after the time stipulated in the bill of exchange. On receiving the payment on the due date, the factoring company credits the amount of margin after accounting for their charges and interest. The factoring companies take care of the freight carriers as well. Usually, in such a transaction, the freight carriers do not receive their money upfront. They get the amount after they deliver the goods at the destination. In the meanwhile the freight carriers have to undergo expenses such as fuel charges, maintenance charges, etc. The factoring company has plans whereby they pay the freight carriers in advance. They have plans where they issue fuel cards that enable the truckers to procure fuel free of charge. Of course, the factoring company deducts these charges from their bill while making the payment. Thus, you can see that every party to the transaction benefits from the factoring transaction. The sellers get their money immediately, albeit at a discount. However, that should be enough to set the ball rolling and take care of the cash crunch. The buyer gets to use the goods and repay the amount after the period mentioned in the bill. The freight carriers benefit because they get their payment as well before time. Finally, the factoring company charges interest from the seller. This is their profit margin. Hence, you have seen that all the four parties to the transaction benefit from the same. The factoring companies play a great role in the bargain. By releasing the payment before the due date, they benefit the seller a great deal. He gets t roll or use this money to procure raw materials and proceed towards the satisfaction of the subsequent orders. This unlocks the funds and hence, the business cycle proceeds unhindered. The emergence of numerous factoring companies is ample proof that the facility is becoming extremely popular day by day. It is very easy to set up an account online as well. Applying for the factoring facility is very easy. However one should note that factoring can help people who do genuine business transactions and not kite flying ones.
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